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Exhibit 1 Page 1 Summary of Model Assumptions (1) Payout Patterns were generated based upon an exponential settlement lag distribution with mean lags to settlement of one year, five years, and ten years for LOB 1-3, respectively. Thus, the payout patterns for LOB 1-3 can be characterized as Fast, Average, and Slow, respectively. Payments are assumed to be made in the middle of each year. (2) Interest is credited on supporting surplus using risk free rates for bonds of duration equal to the average payment lag in each line of business. In this example, interest rates of 3%, 4% and 5% for LOB 1-3, respectively, were assumed. These are the same rates that are used to calculate Net Present Value (NPV) reserves, interest on supporting surplus, and the NPV Reserves Capital component of Required Rating Agency Capital. (3) For simplicity, interest rates and payment patterns are assumed to be deterministic. (4) Profitability measures are computed before taxes, overhead, and returns on capital excess the rating agency required capital. Example Key Assumptions Purpose of Example 1 Write equal amounts of premium in three lines of business. Base example with no reinsurance. Pricing is accurate, as the Plan Loss Ratios equal the true ELR's. The ELR's are equal to 80% for all three lines. No reinsurance is purchased. Aggregate losses are assumed to be modeled accurately by lognormal distributions with coefficients of variation of 80%, 20% and 40% for LOB 1-3, respectively. The correlation between LOB 1 and LOB 2 losses is 50%. 2 Same assumptions as in Exhibit 2, except a 30% xs 90% Loss Ratio Stop Loss Test impact of stop loss reinsurance program for LOB 1. reinsurance program is purchased for LOB 1 at a 10% rate. 3 Same assumptions as in Exhibit 2, except a 50% Quota Share is Test impact of quota share reinsurance program for LOB 1. purchased for LOB 1 with commission just covering variable costs. Exhibit 1 Page 2 Model Summaries (1) For both models, capital needed to support the portfolio risk is calculated as 150% of Excess Tail Value at Risk (XTVAR). That is, the Company wants 50% more capital than needed to support 1 in 50 year or worse deviations from plan. Capital needed to support the portfolio risk is allocated to line of business based upon Co-Excess Tail Values at Risk (Co-XTVAR). (2) Returns on Risk Adjusted Capital Model (RORAC): Expected Total Underwriting Return is computed by adding the mean NPV of interest on reserves from the simulation, interest on allocated capital, and expected underwriting return (profit and overhead). RORAC is computed as the ratio of Expected Total Underwriting Return to allocated risk capital, and represents the expected return for both benign and potentially consumptive usage of capital. (3) Risk Returns on Capital Model (RROC): (a) Risk Returns on Capital (RROC) may be thought of as a composite of the EVA and RORAC approaches to measuring profitability. The Mean Rental Cost of Rating Agency Capital (an EVA Concept) is subtracted as a cost before applying RORAC concepts to compute the return on allocated capital for exposing capital to potential loss. (b) Required Rating Agency Capital is computed based upon rating agency premium and reserves capital charge factors assumed appropriate for the Company's desired rating. Somewhat smaller factors were selected for the reinsurance line (LOB 4) under the assumption that the Company would not receive full credit for ceded premium and reserves because a charge for potential uncollectibility would be applied. Capital needed to support reserves for a calendar year is the product of the reserves factors and the previous year-end reserves. Capital needed to support reserves must be calculated for all future calendar years until reserves run off. Required capital to support reserves is the NPV of these capital amounts. (c) The Mean Rental Cost of Rating Agency Capital is calculated by multiplying the Mean Rating Agency Capital from the simulation by the selected Rental Cost Percentage, an opportunity cost of capacity. (d) Expected Underwriting Return is computed by adding the mean NPV of interest on reserves and interest on mean rating agency capital to expected underwriting return (profit and overhead). The Expected Underwriting Return After Rental Cost of Capital is computed by subtracting the Mean Rental Cost of Rating Agency Capital. As for RORAC, risk capital is 150% of XTVAR. Capital is allocated to line of business based upon Co-XTVAR. RROC is computed as the ratio of the Expected Underwriting Return After Rental Cost of Capital to allocated risk capital. RROC represents the expected return for exposing capital to risk of loss, as the cost of benign rental of capital has already been reflected. Exhibit 2 Model Comparisons for All Lines Combined Returns on Risk Adjusted Capital (RORAC) Risk Returns on Capital After Rental Cost of Capital (RROC) Cost of Capital Cost of Capital Example Gross * Net Difference Released Gross * Net Difference Released 1 17.50% 17.50% 9.95% 9.95% 2 17.50% 17.88% 0.4% 12.6% 9.94% 10.05% 0.1% 8.6% 3 17.55% 25.74% 8.2% 5.6% 9.97% 15.36% 5.4% 2.1% Model Comparisons LOB 1 and LOB 4 (Reinsurance) Combined Returns on Risk Adjusted Capital (RORAC) Risk Returns on Capital After Rental Cost of Capital (RROC) Example Gross * Net Difference Gross * Net Difference 1 5.84% 5.84% 1.80% 1.80% 2 5.85% 5.21% -0.6% 1.81% 1.17% -0.6% 3 5.86% 6.44% 0.6% 1.82% 2.00% 0.2% Model Comparisons LOB 2 Returns on Risk Adjusted Capital (RORAC) Risk Returns on Capital After Rental Cost of Capital (RROC) Example Gross * Net Difference Gross * Net Difference 1 61.41% 61.41% 37.52% 37.52% 2 62.09% 62.54% 0.4% 37.96% 38.25% 0.3% 3 63.45% 63.83% 0.4% 38.85% 39.10% 0.3% Model Comparisons LOB 3 Returns on Risk Adjusted Capital (RORAC) Risk Returns on Capital After Rental Cost of Capital (RROC) Example Gross * Net Difference Gross * Net Difference 1 131.06% 131.06% 93.60% 93.60% 2 122.28% 112.67% -9.6% 87.09% 79.95% -7.1% 3 114.39% 50.28% -64.1% 81.22% 33.62% -47.6% Stop Loss Example 2: Comparison of Capital Requirements Quota Share Example 3: Comparison of Capital Requirements Gross Net Combining Net Gross Net Combining Net Line Gross * Weight Net Lines 1 and 4 Weight Line Gross Weight Net Lines 1 and 4 Weight 1 4,919,918 85.90% 4,892,514 4,468,187 84.24% 1 4,886,073 85.59% 4,069,551 2,034,775 59.99% 2 453,766 7.92% 450,304 450,304 8.49% 2 443,376 7.77% 440,592 440,592 12.99% 3 353,859 6.18% 385,446 385,446 7.27% 3 379,403 6.65% 916,596 916,596 27.02% 4 (424,327) 4 (2,034,776) 5,727,543 100.00% 5,303,937 5,303,937 100.00% 5,708,852 100.00% 3,391,963 3,391,963 100.00% Average RORAC: 17.50% 17.88% Average RORAC: 17.55% 25.74% Average RROC: 9.94% 10.05% Average RROC: 9.97% 15.36% * Note that Gross simulated returns differ somewhat between Examples for lines allocated a small share of the total capital due to differences in simulation results. Exhibit 3 Page 1 Quota Share Reinsurance Example Comparing Returns on Risk Adjusted Capital with Returns on Capital After Rental Cost of Capital Fast Pay Average Pay Slow Pay Reinsurance 1) Loss Generator LOB 1 LOB 2 LOB 3 LOB 4 NET TOTAL 1A) True Expected Loss: Copy and Paste-Special from LOB 4 of (3H). 1,000,000 1,000,000 1,000,000 (500,000) 2,500,000 1B) Coefficient of Variation of Assumed Lognormal Loss Distribution 80.0% 20.0% 40.0% 1C) Standard Deviation 800,000 200,000 400,000 1D) Profit and Overhead Margin (includes Brokerage on Reinsurance) 9.0% 8.0% 7.0% 9.0% 7.8% 1E) Variable Expense Ratio 11.0% 12.0% 13.0% 11.0% 12.2% 1F) Plan Premium 1,250,000 1,250,000 1,250,000 (625,000) 3,125,000 1G) Expected Loss Ratio = (1A)/(1F) 80.0% 80.0% 80.0% 80.0% 80.0% 1H) Expected Underwriting Return (Profit & Overhead) 112,500 100,000 87,500 (56,250) 243,750 1I) Plan Loss Ratio 80.0% 80.0% 80.0% 80.0% 80.0% 1J) Plan Expected Loss 1,000,000 1,000,000 1,000,000 (500,000) 2,500,000 1K) Pricing Error = ((1J)-(1A))/(1A) 0.0% 0.0% 0.0% 0.0% 0.0% 2) Capital Usage Calculation LOB 1 LOB 2 LOB 3 LOB 4 NET TOTAL 2A) Required Capital Charge on Premium 40.0% 40.0% 40.0% 35.0% 41.0% 2B) Required Capital Charge on Reserves 25.0% 25.0% 25.0% 20.0% 25.2% 2C) Rental Fee 10.0% 2D) Required Premium Capital =(1F)*(2A) 500,000 500,000 500,000 (218,750) 1,281,250 2E) Simulated Required NPV Reserves Capital = (2B)*(NPV Future Reserves) 229,011 1,022,318 1,637,097 (91,604) 2,796,821 2F) Simulated Total Required Rating Agency Capital = (2D)+(2E) 729,011 1,522,318 2,137,097 (310,354) 4,078,071 3) Annual Simulation LOB 1 LOB 2 LOB 3 LOB 4 NET TOTAL 3A) Simulated Losses 1,000,000 1,000,000 1,000,000 (500,000) 2,500,000 3B) Deviations From Plan = (1J)-(3A) - - - - - 3C) Deviation from Plan at 2nd Percentile: Copy and Paste-Special from (3K), re-run simulation to calculate XTVAR. (2,310,809) (472,747) (1,048,430) 1,155,288 (1,679,627) 3D) Deviation from Plan when Exceed 1 in 50 Year Result - - - - - 3E) Flag to Count Number of Simulations in Excess of 1 in 50 Year Result - - - - - 3F) Contribution to Gross 1 in 50 Year Result - - - 3G) Contribution to Net 1 in 50 Year Result - - - - - Loss Simulation Statistics Number of Simulations: 100,000 LOB 1 LOB 2 LOB 3 LOB 4 NET TOTAL 3H) Expected Loss 1,000,009 1,000,003 999,998 (500,005) 2,500,006 3I) Standard Deviation 800,103 200,028 399,974 400,052 657,760 3J) Coefficient of Variation 80.0% 20.0% 40.0% -80.0% 26.3% 3K) Percentiles of Deviations from Plan (Negatives are Values at Risk) 0.1 Percentile (1 in 1000) (5,870,875) (808,528) (2,056,781) 2,928,441 (3,538,483) 1st Percentile (1 in 100) (3,010,960) (554,496) (1,275,329) 1,505,136 (2,063,235) 2nd Percentile (1 in 50) (2,310,938) (472,759) (1,048,428) 1,155,244 (1,692,567) 5th Percentile (1 in 20) (1,483,359) (358,194) (749,783) 741,605 (1,210,214) 10.0 Percentile (1 in 10) (923,290) (263,894) (521,248) 461,604 (837,389) 50th Percentile (1 in 2) 219,129 19,415 71,515 (109,568) 104,896 90th Percentile 682,957 239,216 433,300 (341,484) 717,829 Exhibit 3 Page 2 Quota Share Reinsurance Example Comparing Returns on Risk Adjusted Capital with Returns on Capital After Rental Cost of Capital Key Assumptions: Write equal amounts of premium in three lines of business. The correlation between LOB 1 and LOB 2 losses is 50%. A 50% Quota Share is purchased for LOB 1 with commission just covering variable costs. Pricing is accurate, as the Plan Loss Ratio equals the ELR for all three lines. The ELR's are equal for all three lines. 4) Returns on Risk Adjusted Capital (RORAC) Risk Capital Standard (Multiple K of XTVAR): LOB 1 LOB 2 LOB 3 LOB 4 NET TOTAL 4A) Plan Premium 1,250,000 1,250,000 1,250,000 (625,000) 3,125,000 4B) Expected Underwriting Return (Profit & Overhead) 112,500 100,000 87,500 (56,250) 243,750 4C) Average Deviation from Plan When Exceed 1 in 50 Year Result (XTVAR) (3,423,226) (588,435) (1,381,853) 1,711,613 (2,260,925) 4D) Gross Risk Capital K% of XTVAR, Allocated to Line Based Upon Co-XTVAR's 6,514,764 591,168 505,871 4E) Interest Rate Assumed 3.0% 4.0% 5.0% 3.0% 4F) Interest Earned on Gross Allocated Capital = (4D)x(4E) 195,443 23,647 25,294 4G) Mean Net Present Value of Interest Earned on Reserves 27,485 163,603 327,516 (13,742) 504,861 4H) Gross Expected Total Underwriting Return = (4B)+(4F)+(4G) 335,427 287,250 440,310 4I) Gross Return on Risk Adjusted Capital = GRORAC = (4H)/(4D) 5.15% 48.59% 87.04% 4J) Net Risk Capital K% of XTVAR, Allocated to Line Based Upon Co-XTVAR's 5,426,069 587,457 1,222,128 (2,713,034) 4,522,619 4K) Interest Earned on Net Allocated Capital = (4E)x(4J) 162,782 23,498 61,106 (81,391) 165,996 4L) Net Expected Total Underwriting Return = (4B)+(4G)+(4K) 302,767 287,101 476,123 (151,383) 914,607 4M) Net Return on Risk Adjusted Capital = NRORAC = (4L/(4J) 5.58% 48.87% 38.96% 5.58% 20.22% 4N) Change in Return Due to Reinsurance = (4L - Net Total) - (4H - Gross Total) (148,380) 4O) Change in Allocated Capital = (4J - Net Total) - (4D - Gross Total) (3,089,184) 4P) Cost of Additional XTVAR Capital=(4N)/(4O) 5) Risk Returns on Capital (RROC) After Rental Cost of Capital Risk Capital Standard (Multiple K of XTVAR): LOB 1 LOB 2 LOB 3 LOB 4 NET TOTAL 5A) Mean Rating Agency Capital = Mean of (2F) 729,013 1,522,321 2,137,093 (310,355) 4,078,072 5B) Mean Rental Cost of Rating Agency Capital = (5A)*(2C) 72,901 152,232 213,709 (31,036) 407,807 5C) Mean Interest Earned on Rating Agency Capital = (5A)x(4E) 21,870 60,893 106,855 (9,311) 180,307 5D) Expected Underwriting Return After Rental Cost of Capital=(4B)+(4G)+(5C)-(5B) 88,954 172,264 308,161 (48,267) 521,111 5E) Gross Risk Capital K% of XTVAR, Allocated to Line Based Upon Co-XTVAR's 6,514,764 591,168 505,871 5F) Gross Risk Return on Capital = GRROC = (5D)/(5E) 1.37% 29.14% 60.92% 5G) Net Risk Capital K% of XTVAR, Allocated to Line Based Upon Co-XTVAR's 5,426,069 587,457 1,222,128 (2,713,034) 4,522,619 5H) Net Risk Return on Capital = NRROC = (5D)/(5G) 1.64% 29.32% 25.22% 1.78% 11.52% 5I) Change in Return Due to Reinsurance = (5D for LOB 4) (48,267) 5J) Change in Allocated Capital = (5G - Net Total) - (5E - Gross Total) (3,089,184) 5K) Cost of Additional XTVAR Capital=(5I)/(5J) GROSS TOTAL 3,000,000 8.0% 12.0% 3,750,000 80.0% 300,000 80.0% 3,000,000 0.0% GROSS TOTAL 40.0% 25.0% 1,500,000 2,888,425 4,388,425 GROSS TOTAL 3,000,000 - (2,671,871) - - - GROSS TOTAL 3,000,010 992,642 33.1% (6,282,611) (3,412,871) (2,681,451) (1,819,725) (1,204,122) 195,304 996,299 200% GROSS TOTAL 3,750,000 300,000 (3,805,255) 7,611,804 244,383 518,603 1,062,987 13.96% 4.8% 200% GROSS TOTAL 4,388,427 438,843 189,618 569,379 7,611,804 7.48% 1.6%

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